The recent earnings report released by Tesla shows their intention to raise $1.5 billion in junk bonds, and also to drop the price of the Model X.
Not long after these revelations, the company announced that they would be opening a factory in China.
A little over a week ago, Tesla released their earnings report, which shed light on the current fundamental interests to the company. Demand for the Model 3 and Model X have surprised analysts. Despite the future obviously never being predictable, all signs appear to be pointing to a bright future for the electric vehicle/energy company.
Tesla offering $1.5 billion in junk bonds
Tesla’s new Model 3 Sedan has proven to be highly popular, customer reservations for the electric vehicle have skyrocketed to around 455,000 pre orders. Consequently, Elon Musk proposes offering notoriously high-risk junk bonds to raise the necessary $1.5 billion in revenue to meet the demand.
Companies in financial trouble generally offer junk bonds, and it was only last March that Tesla raised $1.4 billion in a convertible debt offering. Musk appears to be willing to risk offering junk bonds due to his faith in the popularity of his products.
Many are surprised that Musk chose the route of junk bonds over raising equity. However, Tesla wish to avoid diluting their existing stockholders. They estimate that the debt market could end up swelling that in the long run.
High profitability enables Tesla to drop Model X price
People wishing to get their hands on an electric vehicle may be closer to doing so. Tesla has dropped the price of their Model X by $3,000. Originally selling at $82,500, you can now get your hands on the car for $79,000. So why the dramatic price reduction?
According to Tesla, the production process has revealed many “efficiencies.” Consequently, this resulted in raised profit margins. Subsequently, the company believes that sales of the Model X will grow.
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